If you are required to put in 1 million for a worst case potential loss, then your account is not enabled for naked contracts and you are essentially doing cash covered positions. I use etrade and at least in etrade you can go up to level 4 options trading account.
I changed my entire portfolio today. Bought back pypl and meta for 60 percent profit and 25 percent profit - not bad for a 1 day hold. And sold 610 ewz contracts for dec 30 2022 strike $22 for 65k of premium. Goal is to close the year with 50k in net profit for the year. Using 200k of buying power, have a safety margin of 110k of buying power remaining. See attached for current portfolio.
Your account is just not actually doing naked positions. In fact, despite only having $317k in my account today, i could purchase $640k of ewz with my margin account itself, but then I’m paying interest in margin, so I’m never going to do that.
An index is not going to 0. It contains some very profitable companies that are pumping out cash with very low price to earnings ratio.
Etrade requires between 10 to 17.5 percent of the money to cover a naked position depending on what it is and how far the strike is. Spy, qqq, rut, spx require only 10 percent for strike below 15 percent current strike which changes to 15 percent for strike less than 15 percent from current price. Ewz i believe requires only 17.5 or 15 percent, something like that. This number can change, but etrade does not make large changes for an ETF. Event during covid crash, this percentage margin maintenance requirement did not change. And covid crash was truly historic - 5-10 percent spy drops a day. They were fun to watch.
I have backup plans as well. Remember, as a 2 physician household, over the next 5 months the two of us will have 120k liquid extra cash. If ewz crashes, that’s an extra 120k buffer i can cash flow over 5 months. Secondly, if things really go to hell and $24 is breached, then i will buy back dec 30 22 contracts 22 strike with the premium of march 2023 strike 20. I lose 3 months of time, but the 3 months basically pay for the entire cost of dropping the strike to $20, and effectively then i only need $1.2M for a cash covered position then. While my account value is $319k right now, the cash in my account is actually $379k from the premium i received from ewz today. So between cash flow, dropping strike, cash from premiums for further out positions, i can very very easily manage this position. And if strike goes to $20, then i just hold and keep milking the high premiums and let the position recover, so essentially the equivalent of holding 1.2M in ewz while enjoying high premiums. This is going to make me a lot of money, i just need the appetite to be able to hold even if ewz drops significantly. I’m getting very very very good at holding large positions without flinching.
It’s really not that bad. Check back with me in 5 months, im fairly certain I’m ending the year positive. And i guess I’ll show you in 5 months time
see account holdings, balances, and current healthy margin maintenance excess in attachments. Officially down 3.5 percent YTD today. That’sa very very healthy margin maintenance excess buffer - so I’m leverage, but really not that leverage when i have 1/3rd of my buying power just sitting and waiting.